So, what is a business partnership and how are they different from a sole trade or company structure?

A business partnership is a structure where two or more individuals work together to run a business and share the profits, risks, and responsibilities. It sits somewhere between sole trade and limited company in terms of flexibility, control, and complexity.

Sole Trader

• One person owns and runs the business

• All profits go to the individual

• Unlimited liability – personal assets are at risk

• Taxed via Income Tax and Class 2/4 NICs

• MTD for ITSA applies from April 2026 (if gross income >£50k)

On Exit:
There’s no company to sell — you’re effectively selling goodwill, client lists, or assets. Taxed as a capital disposal, potentially with Business Asset Disposal Relief (BADR) (formerly Entrepreneurs’ Relief), if qualifying conditions are met.

Business Partnership

• Two or more individuals share ownership and profits

• Joint and several liability (unless structured as a limited partnership)

• Still taxed as individuals via Income Tax and NICs

• Must register as a partnership with HMRC

• MTD for ITSA applies after sole traders and landlords.  Exact timing is not yet known, but we’re confident it will not be in the next 3 years, if we were the gambling sort, our money is on 2030.

On Exit:
Like sole traders, partnerships don’t have shares. A partner exiting the business may receive a payment for their share of capital accounts, goodwill, and assets. Gains may qualify for BADR depending on how the exit is structured and how long the partner has been involved.

Limited Company

• A separate legal entity

• Pays Corporation Tax on profits

• Directors/owners can extract value via salary, dividends, or pension contributions

• Limited liability for shareholders

• More admin, but may offer tax planning benefits

• Not (yet) in scope for MTD for ITSA

On Exit:
You’re selling shares in the company, or the company sells its trade/assets. Share sales may qualify for BADR (10% tax on first £1m lifetime gains). However, asset sales within the company can trigger double taxation — once in the company, then again when profits are extracted.

So why are more business owners now considering partnerships?

• They’re still flexible, collaborative, and less formal than a company
• More generous in terms of expense claims than many expect
• Delay in MTD obligations gives more time to adjust
• Avoid the burden of Companies House admin and corporation tax filings
• Can be a useful structure when planning future succession or joint ventures

In Summary:

Choosing the right business structure isn’t just about how you start—it’s about how you grow and how you exit. Sole trade, partnership, or limited company can all work, depending on your goals, risk appetite, and long-term plans. But understanding how each will affect your tax, control, and saleability is where strategic advice makes the difference.

If you’re weighing your options, or thinking about succession, it’s worth getting tailored guidance now—before HMRC or the market makes the decision for you.